Condo board fraud tough to detect, prosecute

Article Courtesy of The Miami Herald


Published May 25, 2007

The million-dollar theft at the Parker Plaza condo in Hallandale Beach illustrates a sad reality of condo life in Florida:

It's difficult for owners to safeguard the funds they pay their associations for maintenance and repairs.

While many condo and homeowner associations are well-managed by their volunteer officers, a number of factors make it easy for unscrupulous board members and managers to steal:

 Many homeowners don't pay attention to the financial matters of their associations.

 Florida's oversight of associations is limited. For example, while state law requires boards to provide financial records to their members, there is no penalty for boards that fail to do so.

 Police have traditionally been reluctant to investigate allegations of wrongdoing, looking at condo financial issues as a civil matter.

State Representative Julio Robaina, R-South Miami, who has pushed for improvements in Florida's laws regulating community associations, is undertaking a pilot project to ferret out financial wrongdoing in community associations. His staff is working to educate police departments about the often complicated community association finances.

His office worked with Hallandale Beach investigators in their 17-month investigation, which resulted in charges against a contractor and a condo manager in a reported kickback scheme. A former condo board president is expected to surrender Friday.

''Kudos for these folks in Hallandale Beach,'' Robaina said. ``You need to understand what's been going on in associations for years.''

Jan Bergemann, founder of the statewide citizen advocacy group Cyber Citizens For Justice, receives 30 to 50 complaints a day from owners suspicious or unhappy about their association boards.

In most cases, owners have no recourse other than to hire an attorney, which most find too expensive.

''According to the law, you have a right to see the records,'' Bergemann said, ``but what if the board doesn't want you to see the records?

"You can be vigilant and you can look, but what you can you do without the records?''

The state Department of Business and Professional Regulation oversees condos, but owners have complained for years that the agency does little enforcement. The state Legislature set up a condo ombudsman's office, but it has a small staff and doesn't help those in homeowner associations.

Dr. Virgil Rizzo, the state's former condo ombudsman, said he found evidence of crimes at several associations during his time on the job.

At one association, he said, a condo board president would buy items for the association, submitting receipts for reimbursement and then take the items back and pocket the cash.

Board members in other communities, he said, have used association ATM cards to pay for private expenses.

However, the current Florida condo ombudsman, Danille Carroll, warned that owners can't expect police to rush to investigate if all they have are suspicions. Owners who suspect wrongdoing need to find evidence, such as copies of canceled checks and financial statements.

People need to take the time to go to board meetings, she added, and pay attention to what their boards and management are doing.

Also, it is not a crime for a board to mismanage money, warns assistant ombudsman Bill Raphan. Just because a board spends more money than necessary doesn't mean there were kickbacks or other fraud schemes involved, he added.

Here are some common questions about community association problems:

Q:How do I know if there is wrongdoing? It seems as if we have had a lot of special assessments and I don't see any work being done.

A: Go to meetings to see what your board is doing. Check minutes of past board meetings. Ask for copies of bids for work. Check with other companies to see what their prices are. It's a red flag if they would charge much less. Obtain copies of canceled checks -- both sides. It's another red flag if a property manager or board member co-endorses checks to vendors.

If your board or property managers don't want to provide copies of these records, that is also a sign that something could be wrong.

Q:How do I read my community association's financial records?

A: Check to see that your community is getting what it pays for. Do you pay the property management company for employees to work 40 hours but they're there for only 32? Does your community pay for grass cutting twice a month but workers mow it only once? Did your association pay for thousands of plants but only hundreds arrived? If there are any discrepancies, you should document them and alert your board and neighbors -- and police if you think there is criminal wrongdoing.

Q:My community association seems to waste a lot of money. Where can I turn it in?

A: Boards can't be prosecuted for mismanagement, only for stealing or for fraud. Boards members may intend to do well but not understand the complex legal and financial issues. You should encourage -- and vote for -- qualified people to run for the board. Volunteer to help.

Q:Where can I get help?

A: If you are part of a condo association, you can call the South Florida office of the Florida ombudsman's office at 954-202-3234. If you are part of a homeowner or condo association, you can also call Florida Rep. Julio Robaina's office at 305-442-6868.

If you have collected evidence of possible wrongdoing, you can submit that to your local police.

Also, you can go to Cyber Citizens for Justice, a statewide grass-roots consumer group,